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Informist, Wednesday, Jun. 3, 2026

 

MUMBAI – With the war in West Asia in its fourth month, the first signs of demand destruction in the global oil market are visible, according to S&P Global. The war has cut off from the market about 14 million barrels of oil per day, which used to transit the Strait of Hormuz, and this has created a wave of panic-buying, leading prices to skyrocket.

 

However, the effect of the shockwaves has started receding and the dated Brent crude benchmark has retreated 30% from its record high in April, S&P Global said in a report Tuesday. While most major economies have so far avoided mass fuel shortages that would force demand lower, the situation may be changing.

 

More than three months into the war, however, new data is beginning to show 'significant drop-offs' in demand across key consuming economies, which will only accelerate as the conflict persists, the report said, quoting Toril Bosoni, head of oil research at the International Energy Agency at the recent S&P Global Middle East Petroleum & Gas Conference.

 

In May, the IEA slashed its global oil consumption forecasts to predict 420,000 barrels per day of annual contraction in global oil demand this year. Yet, as the conflict has outlasted initial assumptions, the agency may be forced to further downgrade its outlook. "Our scenario forecast assumes there will be some sort of normalisation from June. That's looking unlikely," Bosoni said.

 

Early consumption losses have been led by falling jet fuel demand in West Asia, and declining use of petrochemicals and consumption of liquefied petroleum gas in India, the report said.

 

Panellists at the conference argued that the longer prices stay elevated, the more governments will struggle to sustain costly support mechanisms. Already, countries like Bangladesh, India and Malaysia have turned to demand-side levers to manage markets, implementing measures such as work-from-home policies and cooling restrictions, the report said.

 

Pressure on budgets in places where governments directly or indirectly support product sales may mean prices are already at levels that have a negative impact on demand. Analysts now see 2.4 million barrels a day of demand contraction in 2026, more than five times the scale last projected by the IEA.

 

The US emerged as a major supplier to regions such as Southeast Asia and Europe to replace lost West Asian barrels, but it now faces growing strain on its domestic market. It is approaching record lows in its Strategic Petroleum Reserve, which is historically the world's largest inventory of the fossil fuel.

 

Disturbing signs are also emerging from China. The world's second-largest oil consumer recently cut its crude imports by some 6 million barrels a day, IEA estimates showed.  End

 

Reported by Abhijit Doshi

Edited by Avishek Dutta

 

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